Do the rich need Americans?
blogs.wsj.com
blogs.wsj.com
Isn't this completely predictable? When the government invests hundreds of billions of dollars into the market, by way of dumping money into the financial and automobile industries, and that money's source is loans backed by the people-at-large, then of course this is happening.
The government is transferring money from the taxpayers to those invested in the capital markets. Anybody who believes that the government (not just the GOP but the Democrats as well) is working for the little guy, is a sucker.
Um, the UAW bailout didn't benefit the rich much. Most bondholders/etc took a haircut. The primary beneficiaries were the upper middle class UAW workers/nonworkers (they didn't take a haircut).
CWuestfield and I were discussing actions taken by the government during the bailout, not a business plan the UAW and GM entered into in the 60's.
During the bailout, the administration funneled billions of taxpayer dollars (many of which were paid by people earning less than UAW employees) to the UAW. In the process, they also screwed over bondholders (and ignored the rule of law) who had a legitimate claim to part of the proceeds of GM's liquidation.
That's an example of the government screwing over the rich (and middle class) for the benefit of the upper middle class.
Yeah, but the reason the bondholders were unhappy (as anamax said) is that it officially sanctions this sort of malfeasance, and therefore makes the bond market more risky.
But it's certainly true that equity holders came out quite a bit richer than they otherwise would have. Owners of common stock are last in line in a liquidation, so they likely would have gotten very little. But now they've got more equity than at the time of the bailout.
Thus, the government pumped taxpayer money into GM shareholders.
In the bankruptcy, the Motors Liquidation Company purchased all the valuable assets (including the names and trademarks) from GM. The proceeds were (and are still being) used to pay bondholders and other creditors. Anything remaining would be given to shareholders, but the proceeds of the sale are not expected to be even close to sufficient for this to occur (that's why GM went bankrupt to begin with).
http://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorg...
Update: the more I think about it, the more convinced I am that this is true. If the company really had to be liquidated, the bond holders may have been paid off. But the equity holders would have really taken a bath. So the government did, in fact, keep the equity market rolling.
One of the consequences of not honoring the usual rules of debt in bankruptcy is that loans to govt favored industries/companies are now seen as more risky, which makes them more expensive.
Correct. It's the big corporations, out of the goodness of their hearts, that accomplish this generous task.
"The American wealthy benefit greatly from the country’s legal system and business transparency, not to mention its armed forces."
I guess you'd agree or disagree to the extent that you believe the US military, government, and courts are required to maintain a safe, stable world where trade can take place unabated enough to allow the rise of a global elite. It's not just the US, of course - you could also ask if the haven of Monaco could survive without the military strength of nearby european powers.
The problem is, it can actually be very difficult to evaluate the contribution of the courts and the military to the stabilization of international trade. A resident of Monaco could certainly stump me by asking "well, if the US or French military is so essential for my protection, then who is it who would be attacking me?"
I suppose I could try to come up with an answer (probably easier during the cold war), but the unsatisfying response is "who knows, but a rueful glance through history suggests it would probably be someone."
You probably believe that the rich need the US and allied military to the extend to which you agree with that answer. Same kind of goes for the courts - rather than point to a particular need fulfilled, a lot of people would say that without a system for resolving crimes, torts and even contracts, a modern economy simply couldn't exist.